United States International Trade Commision Rulings And Harmonized Tariff Schedule
faqs.org  Rulings By Number  Rulings By Category  Tariff Numbers
faqs.org > Rulings and Tariffs Home > Rulings By Number > 2007 HQ Rulings > HQ H002853 - HQ H004642 > HQ H003829

Previous Ruling Next Ruling
HQ H003829

May 25, 2007



Mr. Damon V. Pike
The Pike Law Firm, P.C.
4060-D Peachtree Road
Atlanta, GA 30319

RE: U.S.-Chile Free Trade Agreement; Imported Directly

Dear Mr. Pike:

This is in response to your letter dated November 10, 2006, in which you requested information on behalf of your client (the “Company”). Your request concerns the eligibility of merchandise exported from the United States to Chile under the U.S.-Chile Free Trade Agreement (“CFTA”). In particular, you ask whether the Company may certify that paper machine clothing that is produced in the United States and then exported to Canada for further processing, and then either returned to the United States for repacking and shipment to Chile or shipped directly to Chile would qualify for preferential treatment under the CFTA.


According to your letter, the Company designs, manufactures, and markets paper machine clothing (“PMC”). PMC is a highly engineered textile fabric installed on paper machines to carry paper stock through each stage of the paper-making process.

You state that the Company exports PMC fabrics to a related party in Chile. Currently, these PMC fabrics are formed in the United States from U.S.-originating filament yarns. You claim that the fabrics are finished such that the final woven product qualifies as a U.S.-originating good under both the CFTA and the North American Free Trade Agreement (“NAFTA”). The PMC fabric is classified under either subheading 5911.31 or subheading 5911.32 of the Harmonized Tariff Schedule of the United States (“HTSUS”).

The Company is planning to relocate certain finishing processes from its U.S. production facility to its plants located in Canada or other third country. The work to be transferred to the third country includes the following operations:

Inspecting the goods received from the United States and, if applicable, noting any nonconformities, advising quality control staff of any issues, and putting a “Nonconformance Flag” on the goods until a determination can be made;

Seaming the fabric;

Heat-setting of the seam;

Finishing, which involves cutting the fabric to size for the specific paper machine and position, and sealing the fabric edges;

Packing, which includes adding any seam assists, installation assists, or special packaging according to customer specifications; and

Shipping the further processed merchandise to the United States for packaging and then shipment to Chile.


Whether an U.S. company may file a declaration, pursuant to 19 C.F.R. § 10.411, for a good returned to the United States after further processing in a third country.


Eligibility for preferential tariff treatment under the CFTA is determined under General Note 26, HTSUS. Also applicable are the implementing regulations, codified at 19 C.F.R. 10.401 - 490, which follow and supplement the provisions of General Note 26.

Under the CFTA, importers must file a written declaration that the good qualifies for preferential treatment. See 19 C.F.R. § 10.411. Furthermore, pursuant to 19 C.F.R. 10.430, Customs and Border Protection (“CBP”) may request a copy of a U.S. producer’s certification of origin for goods exported from the United States, which provides as follows:

§ 10.430 Export requirements.

Submission of certification to CBP. An exporter or producer in the United States that signs a certification of origin for a good exported from the United States to Chile must provide a copy of the certification (or such other medium or format approved by the Chile customs authority for that purpose) to CBP upon request.

Notification of errors in certification. An exporter or producer in the United States who has completed and signed a certification of origin, and who has reason to believe that the certification contains or is based on information that is not correct, must immediately after the date of discovery of the error notify in writing all persons to whom the certification was given by the exporter or producer of any change that could affect the accuracy or validity of the certification.

Maintenance of records—(1) General. An exporter or producer in the United States that signs a certification of origin for a good exported from the United States to Chile must maintain in the United States, for a period of at least five years after the date the certification was signed, all records and supporting documents relating to the origin of a good for which the certification was issued, including records and documents associated with:

The purchase of, cost of, value of, and payment for, the good;

Where appropriate, the purchase of, cost of, value of, and payment for, all materials, including recovered goods and indirect materials, used in the production of the good; and

Where appropriate, the production of the good in the form in which the good was exported.

The facts in this case indicate the U.S. producer may relocate certain finishing operations to Canada or another third country. Under this scenario, the processing in Canada or other country may disqualify the merchandise if it violates the transit and transshipment provisions of the CFTA. The relevant provisions of the CFTA regulations provide as follows:

§ 10.463. Transit and transshipment.
(a) General. A good will not be considered an originating good by reason of having undergone production that occurs entirely in the territory of Chile, the United States, or both, that would enable the good to qualify as an originating good if subsequent to that production the good undergoes further production or any other operation outside the territories of Chile and the United States, other than unloading, reloading, or any other process necessary to preserve the good in good condition or to transport the good to the territory of Chile or the United States.

19 C.F.R. § 10.463. See also General Note 26(c)(iii)(A), HTSUS.

In Headquarters Ruling Letter (“HRL”) 563304, dated May 18, 2006, CBP addressed a similar issue involving the application of the transit and transshipment provision to Chilean goods imported into the United State via Canada. In that ruling, a Chilean company produced sheepskin garments that were shipped to the United States by way of Canada. Before shipping the goods from Canada to the United States, however, the producer unpacked, vacuumed, and pressed the garments, before they were placed on hangars and inserted individually into bags for shipment to the United States. In that ruling we determined that operations performed in Canada were more than the limited processing allowed under 19 C.F.R. 10.463, noting “[t]he operations of vacuuming, pressing, placing on hangers and individually packaging [the] garments of Chile, when performed in Canada, are beyond those permitted under the transit and transshipment provisions of the CFTA as set forth in General Note 26(c)(iii)(A), HTSUS and section 10.463, CBP Regulations.”

In this case, the processing operations the Company plans to transfer to a third country—including inspecting, seaming, heat-setting seams, cutting, and packing—are much more substantial than the operations specifically allowed under 19 C.F.R. 10.463 and the processing discussed in HRL 563304. Consequently, should the Company transfer these operations to Canada, CBP would determine that processing is beyond the scope of the transit and transshipment provision of the CFTA, and, therefore, such further processing would preclude the issuance of a declaration under 19 C.F.R. 10.411. This determination would be the same regardless of whether the subject merchandise was returned to the United States after further processing in Canada, or shipped directly from Canada to Chile.


The operations of inspecting, seaming, heat-setting seams, cutting, and packing paper machine clothing, when performed in Canada, are beyond those permitted under the transit and transshipment provisions of the CFTA as set forth in General Note 26(c)(iii)(A), HTSUS and section 10.463, CBP Regulations.

A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents are filed without a copy, this ruling should be brought to the attention of the Customs officer handling the transaction


Previous Ruling Next Ruling